Nationally Determined Contributions Across the Americas

Ex ecu�v e Summary Climate change has taken center stage across the globe as the final count- down to the United Nations Climate Change Conference of the Parties (COP26) in Glasgow, Scotland begins. The highly anticipated COP26 meeting gained greater spotlight following the release of the Intergovernmental Panel on Climate Change’s Working Group I’s contribution to the 6th Assessment Report, highlighting the unequivocal evidence of human-induced global warming and its direct impact on increasing extreme weather events’ frequen- cy and intensity. The impacts of climate change (such as hurricanes Lota and Eta smashing into Central America last year, massive forest fires across the Amazon, and severe drought in Argentina, Mexico, Paraguay and Uruguay) and the urgency to act have not gone unnoticed in Latin America and the Caribbean (LAC). Argentina and other LAC nations hosted a regional climate summit on September 8, 2021, in an effort to create a unified front for the upcoming COP26. Among the key issues addressed was the one on how to finance countries’ pledges under the Paris Agreement known as Nationally Determined Contributions (NDCs) assumed by countries, and particularly the role international financial institu- tions could and should be taking, as well as areas in which regional coopera- tion could help advance common goals—such as clean electricity generation and coastal resilience. Many countries in the region have ambitious climate commitments for 2030 and 2050 and are making progress in setting ad hoc policy frameworks to achieve them. What is largely missing is the required funding, both from national and external sources. The gap in required funding among LAC nations is in the order of billions of dollars a year and will prove difficult to meet without outside assistance, particularly in light of the COVID-19 related economic crisis impacting the region—the worst in a generation. With the goal of facilitating dialogue on the need for increased leadership and funding in support of national climate plans across the Americas, the Institute of the Americas’ white paper provides a snapshot of the NDCs, with emphasis on 16 countries: Argentina, Barbados, Brazil, Canada, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, Guyana, Haiti, Jamaica, Mexico, Peru, Trinidad and Tobago, and the United States. Many of these NDCs have been updated. Collectively, the countries profiled in this white paper represent 90%

of the Hemisphere’s total population and 98% of its combined GDP.

We examine, through country-specific scorecards, different relevant commitment components including adaptation—which is extremely relevant for a region that is at high risk of climate disasters. More than 27% of LAC’s population lives in coastal areas, and 6–8% lives in areas that are at high or very high risk of being affected by coastal hazards and sea-level rise. The report also assesses progress made with the incorporation of climate pledges into national legislation. Without institutional and legislative efforts, NDCs are just empty promises. In addition, the alignment of COVID-19 recovery packages with countries’ climate pledges is explored, as this represents an opportunity to build back greener, yet it is an opportunity that has largely been ignored by many nations in the Americas aside from a few, such as Canada, Brazil and Colombia. Finally, we analyze the percentage of commitments that are dependent on international assistance. Only five of the LAC countries we reviewed have made 100% of their pledges unconditional. For a region engulfed in debt, where many of its productive sectors have been endangered by the COVID-19 economic standstill, pinpointing the funding sources for NDC implementation is of the utmost importance. This conditionality of NDCs also means that the burden of their pledges will rely heavily on the G-7 countries and the private sector. In this regard, the United States and Canada, the two most developed economies in the Americas, have recently made new pledges to help address that finance gap. Yet while this pledged direct foreign assistance (DFA) is a useful start, the amount proves completely inadequate in the context of the total needs in Latin America and the Caribbean. Beyond addressing the funding gaps, our white paper outlines the need to leverage nature and ecosystems, adapt successful models to attract investment into renewables such as energy auctions, and make use of innovative finance mechanisms to expand access to capital. Doing so will require developing countries to push through institutional reforms to promote transparency and the rule of law in order to de-risk investments. Countries will also need to make significant efforts to decarbonize their own finances to garner support from international finance institutions and climate funds. The trend away from fossil fuels and how ESG standards are shaping capital flows also bears noting.

2